Friday, February 16, 2007

Viewers Fast-Forwarding Past Ads? Not Always

Emma and Jeff Staples of Knoxville, Tenn., with their dog Sable, use a DVR to record and play back television shows.

By LOUISE STORY

People with digital video recorders like TiVo never watch commercials, right?

Add that to the list of urban — and suburban — myths.

It turns out that a lot of people with digital video recorders are not fast-forwarding and time-shifting as much as advertisers feared. According to new data released yesterday by the Nielsen Company, people who own digital video recorders, or DVRs, still watch, on average, two-thirds of the ads.

One big reason is that many people with DVRs still tune in to watch about half of their shows at the scheduled start time, meaning they must sit through commercials.

And even when people watch recorded shows later, many are not fast-forwarding through the ads. On average, Nielsen found, DVR owners watch 40 percent of commercials that they could skip over — perhaps because they like ads, don’t mind them or simply can’t be bothered.

“People are actually playing back more of the commercials than we thought,” said Steve Sternberg, executive vice president and director of audience analysis at Magna Global Media Research, an ad-buying agency. “People are buying DVRs not because they want to time-shift all of their viewing and skip all commercials, but because they want to time-shift some of their viewing.”

While the new data may well be fodder for cocktail party chatter, it also has major financial implications. Largely because many advertisers thought that people with DVRs were not watching their ads, they have not been paying for time-shifted viewing on DVRs. Now the networks could use the new information to try to charge more. And advertisers may begin pressing networks to rethink commercial breaks — maybe making them shorter.

People who have DVRs often insist that they never watch commercials, as if skipping commercials is a badge of honor. And while it is true that some DVR owners probably watch no commercials, others never touch the fast-forward button. Most people are probably in the middle of those two extremes.

“That’s part of the reward of taping: being able to zip through the advertisements,” said Marjorie Elson, a 62-year-old psychologist in Maryland. “But sometimes I do watch them — only if they capture me.”

TiVo has found that its customers view the last commercial in a break the most, followed by the first commercial. (Viewers sometimes do not start fast-forwarding right away, and they often stop a bit early so they do not miss the next part of the show.) Commercials in the middle fare the worst, said Todd Juenger, vice president and general manager for audience research and measurement at TiVo, which serves 4.5 million of the roughly 15 million DVR viewers.

Nielsen announced the data as part of its preparations to release commercial viewing numbers for every TV program, starting in May. Nielsen, which collects data every few seconds through its set-top boxes, added DVR households to its sample in the last year; its commercial ratings data reflects the total time viewers spend watching ads, including viewing of partial ads, rather than whether ads are watched from start to finish. Advertisers spent upward of $70 billion last year for their TV spots — more than in any other type of media.

“The cable operators that have the subscribers, the programmers who have the content and the marketers have to get ahead of this,” said Curt Hecht, chief digital officer at GM Planworks, the part of the Starcom MediaVest Group that manages General Motors’ ad buying. “They need to figure out how advertising can remain sustainable and effective in the new landscape.”

Advertising and television executives have not yet figured out which DVR owners are more likely to be commercial skippers, though Nielsen has found that younger people generally skip more commercials and time-shift more of their viewing than older people.

Nielsen has also found that commercials are more often watched during playback if the viewer is looking at the show the same day it ran. Commercial viewing drops significantly over time after the original showing. If advertisers start paying for DVR viewing, one question is whether they will pay just when viewers play back shows within a few hours.

Without DVRs, people can, of course, change the channel, leave the room or not pay attention during commercial breaks, but those activities seem to have only a minor effect on ratings during commercials — only 5 percent, according to Nielsen data.

“DVRs are really the big X factor going forward,” said Brad Adgate, senior vice president for research at Horizon Media, an ad-buying agency. “People’s DVR behavior is going to drive the marketplace.”

DVRs, which were introduced in 1999, are becoming more popular every year, and the cable operators are increasingly offering the feature in new set-top box packages. Analysts say DVRs are now in 12 to 20 percent of households. DVR owners tend to be wealthier and more educated than the average TV owner. DVR owners tend to have more children, and some own more than one DVR.

DVR owners account for about 6 percent of all TV viewing, but that figure is likely to grow, said Tracey Scheppach, vice president and video innovations director at Starcom USA. “Four of five people use the word ‘love’ when they describe this product, and when you have a product that powerful, it is going to become mainstream,” Ms. Scheppach said.

Starcom USA signed on last month to become TiVo’s first customer for a new monthly rating service in which TiVo will sell viewership numbers for commercials and programs seen by its customers. Companies like Nissan have already bought TiVo data to analyze how often their commercials are fast-forwarded. TiVo has long been tracking what its viewers watch, down to the second. But it is just now beginning to develop demographic data, using a panel of customers.

In some households, children are exposed to TV only through DVRs. Patricia Bowen, 35, a commercial property manager in San Antonio, said she liked being able to control what her children watched by programming acceptable shows on the DVR. She said her family liked to stop fast-forwarding during commercials to watch Apple and Geico ads.

“My son doesn’t understand why other people cannot pause their TV when they need to go to the bathroom,” she said.

Advertisers are well aware that coming generations may be DVR users. Visa decided to use brighter colors in its recent “Life Takes Visa” commercials in an effort to get fast-forwarders to stop and watch for a moment, said Susanne Lyons, chief marketing officer for Visa.

“We’re trying to make a bigger-than-live color statement so when you’re flipping through quickly, the color jumps out,” Ms. Lyons said.

But Visa also decided not to advertise on TV at all in its new campaign for Visa Signature, a card for affluent consumers, in part because DVRs tend to be in wealthier households, Ms. Lyons said.

Emma Staples, a 29-year-old sales manager in Knoxville, Tenn., says she fast-forwards the commercials at a slower speed than her husband in case she wants to stop and watch one.

“I like to see what is going on in commercials,” Ms. Staples said. “Sometimes I’ll stop if it’s a preview for a movie I might want to see.”

Advertisers generally do not get to purchase particular positions in commercial breaks, even though it has long been known that the first and last position are best for brand recall. Now, networks may have to consider what happens to advertisers that follow a boring ad.

“If you have a horrible ad in the first position and it just basically drives people away, whose fault is that?” said Alan Wurtzel, president for research at NBC Universal.

Network executives said they had talked to a number of advertisers developing commercials that remain visible even during fast-forwarding. TV networks are testing to see how often DVR users remember ads even when they fast-forward through.

The cable operators are also experimenting with ads shown through video-on-demand and promotions for ads that run along the bottom of screens during TV viewing. Advertisers like Burger King and General Motors have purchased a new offering from TiVo that asks people at the end of shows if they would like to see a commercial.

Network executives said that commercial skipping has been overblown.

“When you talk to an advertiser it is like ‘Oh god, I’ve got to go on to the Internet because on television these people are fast-forwarding through the commercials,’ ” said David Poltrack, the chief research officer for the CBS Corporation.

Mr. Poltrack also said that the networks had always focused primarily on attracting the most viewers to their programs. As DVRs become more popular, he said, networks will be forced to find ways to keep more people watching commercials.

Katherine Bryant, 29, owns three DVRs — two in her home in Charleston, S.C., and one in her Oklahoma City apartment. Ms. Bryant, a dentist, said she watched more TV shows than she used to because she no longer had to sit through all the ads.